FREE TRADER'S ASSESSMENT

EUR/USD Update

Good Morning. “Big figures”, in FX parlance – prices ending in two zeroes – tend to exert some gravitational force, and at present, selling interest at 1.3200 seems to be inhibiting any move higher in EUR/USD. This is also well within the selling zone that was identified earlier in the week. I would still be inclined to cover and take another look on a breach of 1.3230, and the hourly chart remains in an uptrend, with support potentially coming in between 1.3110 and 1.31. Bank traders love identifiable ranges where they can feel comfortable selling at one end and buying at the other, although those situations never last as long as they’d like.

When an Â obvious level holds, there tends to be talk of options positions being defended, and that could certainly be the case at 1.3200. Be that as it may, barring a break above 1.3230, the downside continues to hold more potential for profit, as I read the chart. Given how things are setting up, if the average on my short position was better than 1.3170 or so, I’d look to take some profits at or just above 1.3100, making the remainder of the trade no worse than a break even. If my average was lower, I’d still be inclined to be patient, and look to a bounce (from 1.3100, perhaps?) to provide an opportunity to scale in, producing a better average.

Now that 1.3200 has been identified as technical as well as psychological resistance (the two are, of course, related), people will become increasingly confident about selling just ahead of that level. By the same token, a break higher would now be meaningful, and might well lead to a push to the 50% retracement line on the daily chart, which at present is 1.3230. If I’m correct about the persistence of the downtrend, I would still expect the latter point to hold, even under stress.

Best of luck!

P.S. Since things are pretty much working this morning, I thought that I’d take a moment at 10:15 EDT to update the update. If the market cared about the 1.3110/00 level, which I thought might provide some support, it didn’t care much; 1.3072 has been the low thus far. The hourly chart certainly looks to be heading into a downtrend, which will bring it back into synch with the daily. There seems to be some congestion between roughly 1.3080 and 1.3020 which could take some time to chew through. but “down” looks to be re-established as the direction. To be fair, this is less a Euro move lower than a general Dollar move higher, as the Dollar Index ($DXY) highlights.